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How Systematic Investment Plan(SIP) works?

A Systematic Investment Plan or SIP is a smart and hassle free mode for investing money in mutual funds. SIP allows you to invest a certain pre-determined amount at a regular interval (weekly, monthly, quarterly, etc). A SIP is a planned approach towards investments and helps you inculcate the habit of saving and building wealth for the future.

There are lots of benefits of saving the through SIP’s.
1.) Disciplined Saving.
2.) Convenience.
3.) Flexibility.
4.) Long Term Gains.

Example
If you started investing Rs. 10000 a month on your 40th birthday, in 20 years time you would have put aside Rs. 24 lakhs. If that investment grew by an average of 7% a year, it would be worth Rs. 52.4 lakhs when you reach 60.

However, if you started investing 10 years earlier, your Rs. 10000 each month would add up to Rs. 36 lakh over 30 years. Assuming the same average annual growth of 7%, you would have Rs. 1.22 Cr on your 60th birthday – more than double the amount you would have received if you had started ten years later!